When you need money quickly, it’s easy to see what you want to see. That’s exactly when a friend’s second look is most useful. Most loan offers are perfectly fine. The ones that aren’t tend to share a handful of warning signs — and once you know them, they’re hard to miss.
Red flag 1: Fees before approval
“Just pay the application fee and we’ll process your loan.” Or an “insurance bond”, “security deposit” or “first repayment in advance” — before anything has been approved.
This is the oldest trick in the book. Legitimate lenders usually take their costs from the loan at settlement, or agree specific costs (like a valuation) clearly and in writing as part of a real process. A demand for money before approval — particularly by bank transfer to a personal account, gift cards or crypto — is a strong sign of a scam.
Red flag 2: Guaranteed approval
“Approval guaranteed, no matter your credit!”
No responsible lender guarantees approval before looking at your situation. Lenders on our panel consider bad credit, defaults and arrears case by case — that’s very different from promising a yes without asking a question. A guaranteed approval either isn’t real, or means the lender isn’t concerned about whether you can repay because it’s relying on fees or security instead.
Red flag 3: Pressure to sign right now
“This offer expires at 5pm.” “Sign on my phone and I’ll get it moving.” “Don’t worry about reading it all, it’s standard.”
Genuine deadlines exist — settlements, supplier deals, IRD dates — but a good lender still gives you time to read the documents and get advice. Pressure to skip that step is about their interests, not yours.
If someone’s in more of a hurry for you to sign than you are, ask yourself why.
Red flag 4: No total cost in writing
If you can’t get a clear written answer to “how much will I repay in total, including every fee?”, be very careful. Watch for offers that only talk about:
- a small weekly or daily repayment;
- a “factor” or multiplier without a plain total;
- a headline rate with fees listed separately somewhere else.
Our guide to the true cost of borrowing shows how to compare offers properly.
Red flag 5: You can’t find them anywhere official
Check:
- the Financial Service Providers Register;
- the Companies Office register for the company behind the brand;
- which dispute resolution scheme they belong to.
If none of that adds up — no company name, no address, a free email account, a website registered last week — step away.
Red flag 6: Documents that don’t match the conversation
The loan amount is different. There’s a fee nobody mentioned. The term is shorter. A guarantee now covers “all obligations”. A general security agreement appears that wasn’t discussed.
Changes happen in legitimate lending too, but they should be explained before you sign — not discovered afterwards.
Red flag 7: They discourage legal advice
For secured loans and guarantees, independent legal advice is often a lender requirement. A lender or intermediary who tells you “you don’t need a lawyer for this” or rushes a supporting family member past that step is a concern.
Red flag 8: The stacking trap
This one isn’t always a dodgy lender — it’s a dangerous pattern. You take one short-term loan with frequent repayments. Cash gets tight, so you take a second to cover the first. Then a third. Each new lender takes a slice of every deposit, and soon most of your income is going out the door before you can use it.
If you’re being offered a new loan to cover repayments on an existing one, pause. A single, properly structured refinance is often far better. See refinancing expensive debt.
Red flag 9: Unsolicited offers out of nowhere
A text or email saying you’ve been “pre-approved” for a business loan you never applied for, especially with a link asking for bank logins or ID, is almost certainly phishing. Never share your internet banking password with anyone — no genuine lender needs it.
Red flag 10: Vague answers about the exit
For short to medium term loans, a good lender will want to know how you’ll repay. If nobody asks — or if the lender seems indifferent to whether the loan can realistically be repaid — that’s worth noticing. Loans designed to fail make money for someone, and it isn’t you.
A quick red-flag checklist
| Warning sign | Seen it? |
|---|---|
| Fees demanded before approval | ☐ |
| Approval “guaranteed” before any questions | ☐ |
| Pressure to sign immediately | ☐ |
| No total cost in writing | ☐ |
| Not on the FSPR, no dispute resolution scheme | ☐ |
| Documents differ from what was discussed | ☐ |
| Legal advice discouraged | ☐ |
| New loan offered to cover existing repayments | ☐ |
| Unsolicited “pre-approval” with a link | ☐ |
| No interest in how you’ll repay | ☐ |
One tick is a reason to slow down. Two or more is a reason to walk away.
What to do if something feels off
- Stop and don’t send money or documents.
- Check the lender on official registers.
- Talk to someone — your accountant, a lawyer, or us.
- If you’ve already paid or shared details, contact your bank immediately and report it to the National Cyber Security Centre (which now incorporates CERT NZ).
Where LendFriend fits
We only match you with lenders from our panel, we explain every offer in plain English, and we’ll never pressure you to sign. Enquiring with us is free, takes about 60 seconds and doesn’t affect your credit score. If an offer from anywhere looks off, we’re happy to give you an honest second opinion.
And if you do need funding…
That's where we come in. Tell us what's going on and we'll match you with a lender from our panel that fits — and tell you honestly if borrowing isn't the right move.
Quick questions
Is it normal to pay fees for a business loan?
Yes — establishment, legal and valuation costs are common, especially for secured loans. What isn't normal is being asked to pay significant fees before you've been approved, or fees that weren't disclosed until signing.
What should I do if I think a loan offer is a scam?
Stop communicating, don't send money or ID, and check the lender on the Financial Service Providers Register. You can report scams to CERT NZ (now part of the National Cyber Security Centre) and talk to your bank if you've already paid.